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Energy

Vaughn Palmer: NDP and Liberals using similar playbooks when it comes to raising revenues

The NDP’s announcement Thursday of $2 billion in new and reallocated revenues to fund its campaign promises included a return to the corporation capital tax on banks and financial institutions, a move promised by leader Adrian Dix when he launched his bid for the party leadership more than two years ago.

Photograph by: DARRYL DYCK
, THE CANADIAN PRESS

VICTORIA - The New Democrats laid out the most critically important phase of their election platform Thursday, namely the $2-billion worth of tax increases and revenue changes needed to pay for their spending promises.

About the promises, more later.

But the tax changes illustrate the convergence of views between the province’s two major political parties on the revenue side.

The B.C. Liberals in their budget raised the corporate income tax by one point, to 11 per cent from 10 per cent. The New Democrats Thursday formalized what they’d said for some time, that they would raise the tax a further point to 12 per cent.

The higher rate is still four-and-a-half points below where it was when the New Democrats were driven from office in 2001 and the same level that was deemed acceptable by the Liberals as recently as 2008.

The Liberals in their budget also went after folks with taxable income higher than $150,000 a year, taking the lead from hints that the New Democrats were going to do the same.

The New Democrats confirmed their intentions Thursday, though their increase in the rate for the $150,000-a- year-plus bracket is twice as great as the one announced by the Liberals.

Both proposed increases would take effect in 2014 and both would apply only to income above the designated threshold. Under the Liberal proposal, someone with taxable income of $200,000 a year would pay an additional $1,050 a year. Under the New Democrats they’d pay that plus another $1,100 or $2,150 in total.

The New Democrats also announced a return to the corporation capital tax on banks and financial institutions, a move promised by Adrian Dix on the day he launched his bid for the party leadership more than two years ago.

Such a tax was in place under the Liberals as recently as five years ago and on the same basis proposed by the New Democrats: three per cent on banks headquartered outside B.C., one per cent on any with head offices in B.C. and on our homegrown credit unions.

The fourth item on the list of revenue targets for the New Democrats was an expansion in the carbon tax to cover greenhouse gas emissions vented from oil and gas installations, wiping out an exemption established by the B.C. Liberals.

But again, note the element of convergence. The New Democrats fought the 2009 election in opposition to the carbon tax, only to come around and embrace it after the election.

Now they are looking at it as a potential source of revenue. The foregoing change would move the province further away from the principle of “revenue neutrality” established by the Liberals.

Revenue neutrality dictated that the revenues collected by government under the carbon tax would be offset, dollar for dollar, by reductions in other taxes. The auditor general presides over an annual review of revenue neutrality and so far the offsets (cuts to income and business taxes) have been running a surplus in favour of taxpayers.

The fifth item on the NDP list says that if the party forms government, it would reallocate spending measures budgeted by the B.C. Liberals. Those include reneging on the Liberal commitment to an educational savings program, the early childhood tax benefit, and some discretionary spending not spelled out in the release.

All in, the four tax changes would bring in an additional $1.5 billion or so over three budget years starting this month and the reallocations would free up a further half a billion dollars or so, for $2 billion in all.

Recall as well, that last week the New Democrats trashed the Liberal three-year financial plan for being unrealistically low on the spending side. They then announced more “realistic” plans to spend $2 billion more than the Liberals on existing programs over the three years.

The combined $4 billion represents a lot of money, though to keep things in perspective, I would note that the New Democrats are proposing to spend only about three per cent more than the Liberals in total over the three years.

To return to Thursday’s announcement, the $2 billion in new and reallocated revenues would go to fund NDP promises, like this week’s announcement of $45 million in additional tax credits for the film industry.

Other promises will be laid out in a series of announcements in the first 10 days or so of the official election campaign, after the scheduled dissolution of the legislature and issuing of the writ next Tuesday.

That represents a departure from the approach taken by the New Democrats in the 2005 and 2009 election campaigns, when they released their fully costed platform before the writ period.

It also represents a shift from what party leader Adrian Dix indicated for much of last year, that the fully costed election platform would be out before the election campaign.

Instead, he and his team decided to roll out the platform incrementally and hold back some of the promises so they’d have something to announce during the campaign.

As a result, the promised “fully costed election platform” won’t be fully public until the second week of the campaign, on the eve of the election debates.

The NDP’s announcement Thursday of $2 billion in new and reallocated revenues to fund its campaign promises included a return to the corporation capital tax on banks and financial institutions, a move promised by leader Adrian Dix when he launched his bid for the party leadership more than two years ago.

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